Employee share trust supports STT bid for Eircom

EIRCOM’S EMPLOYEE share ownership plan (Esop) has agreed to support the bid by Singapore Technologies Telemedia’s (STT) for the Irish telecoms group.

With the Esop owning 35 per cent of Eircom, STT has now moved into pole position in the race to acquire the Irish business from Sydney-listed parent Eircom Holdings.

In a bulletin issued to members late yesterday, Jerome Barrett, chairman of the Esop, said: “The Esop board recently considered a request from Singapore Technologies Telemedia (STT) to support their bid on an exclusive basis for a period of time. The Esop board has agreed to this.”

Mr Barrett said the decision followed discussions with a number of prospective bidders for Eircom.

It is understood that the Esop, which has about 14,000 members, wants to secure a long-term investor for Eircom and sees an industry player as the best strategic option. It is likely that the Esop would retain a large stake in Eircom if STT’s bid is successful.

The trust recently withheld just under €50 million in dividend payments to its members to build a war chest for any possible involvement in a bid for Eircom. It was reported to have had reserves of €100 million previously.

A handful of other groups have indicated their interest in acquiring Eircom, including private equity companies Permira, CVC and Arcapita. These are all thought to have completed extensive due diligence. One bid has already been tabled for Eircom by TaemasBridge, a private equity vehicle backed by Rob Topfer, the Australian financier and former Babcock Brown executive.

TaemasBridge offered A$175 million for Eircom in April, in a detailed proposal published by Eircom Holdings, the Sydney-listed parent of Eircom. Mr Topfer’s bid has been opposed by Eircom’s management in Ireland and the company’s trade unions.

Irish telecoms entrepreneur Seán Melly is also considering a bid for Eircom, supported by JP Morgan. The sale process is being handled by UBS with bids due to be lodged by the end of this month.

The bid levels for Eircom are expected to be relatively modest given that it has a debt pile of about €3.8 billion. Restructuring this debt will be key to any successful bid.

While the sale of Eircom is in the hands of its Australian parent group – which owns 57 per cent of the Irish company – it is understood that Eircom’s senior executives and directors in Ireland would also favour a sale of the company to an industry player rather than a private-equity group.

An industry player is likely to take a longer term view when assessing strategic goals and investment priorities compared with a private equity player, which would have a three- to five-year horizon in terms of netting a return on its investment.

Eircom’s local management team recently appointed Goldman Sachs to advise it on the sale.

STT has also held meetings with the government in recent weeks to discuss its plans to bid for Eircom.

Founded in 1994, STT specialises in mobile communications. It is a 75 per cent investor in Asia Mobile Holdings, which has mobile interests in Singapore, Laos and Cambodia. It also owns Global Crossing, the fibre-optic cable firm with operations in Ireland.

STT is believed to have been impressed by Eircom’s recent restructuring, which will see about 1,200 workers leave the payroll and yield a €150 million a year saving by June 2011.

This is some €20 million more than envisaged by Eircom when the plan was unveiled in May.